Expert advice for making sure your global financial investments are secure
The recent passing of international celebrity Olivia Newton-John was devastating to her fans, but estate and trust lawyers probably had an added reaction of wondering whether or not she had her estate set up properly. Newton-John most likely owned property in her native Australia and in the United States, if not other homes around the world, and owning any foreign assets can make things complicated at the best of times.
Here are three things to know about estate planning and international holdings.
Share Information with Your Team Immediately
It’s important to inform your team of any foreign real estate investments, properties, stocks or other investments as soon as you purchase them so they can help you come up with a strategy to incorporate them into your estate plan, says Heidi I. Bitterman, J.D., a Whittier Trust vice president.
“Your United States-based estate planner needs to liaise with experts based in the countries where the assets are,” she says. “Every country has its own system of probate and its own planning requirements. You’ll need to secure an estate planning attorney in the country you’re purchasing in to make sure the asset passes the way you’d like it to.” Most countries will have a clear probate system to honor your plan, but some don’t, so make sure you understand how that asset gets transferred. This helps ensure that the transfer happens the way you intended when the time comes.
Bitterman cites a cautionary tale involving a foreign-born client who had become a U.S. citizen. The client retained real estate and assets in her home country, and when she passed, it was discovered she had stocks in her name outside the U.S. “We had no way of knowing they existed and discovered the assets late into the estate administration,” says Bitterman. “They were still sending statements to her address in her home country.”
The client’s team couldn’t file for probate in the foreign country because they were only serving as trustees of her trust, not executors of her will. The client’s beneficiaries were requesting things that couldn’t be done because there was no jurisdiction. “It took us three years to figure it out,” says Bitterman, who adds that the team had a hard time finding attorneys in the home country who specialized in the help that was needed, and they had to solve complex problems like whether the U.S. will could be admitted for probate in a foreign country, and who had the burden of paying for counsel. “We couldn’t give the trust beneficiaries the answers as quickly as they had hoped,” she says.
The moral of the story: if you have foreign entities or ownership, share the information with everyone on your financial team to ensure they’re equipped to act in your best interests.
Consider Tax Implications
Prepare yourself for more complicated taxes when including international property or other holdings in your estate plan. “As a general rule, U.S. citizens are taxed on all their assets, worldwide,” says Bitterman. “If you buy a house in Scotland, the value of that house will have to be included on your U.S. estate tax return.” It’s an important thing to consider if tax efficient investing is a priority.
The tax treaties with other countries and/or estate or inheritance tax regimes in those countries could further complicate things. “Make sure that, in addition to an estate planning attorney in that country, you have a tax lawyer who understands the ramifications of ownership from a tax perspective. You may be subject to different tax regimes,” she says. Additionally, consider an overlay of estate or inheritance taxes on the holdings when you pass.
Make Sure the Right Hand Knows What the Left is Doing
It’s important to have someone connecting the complex dots associated with international holdings. Bitterman advises checking with your U.S.-based counsel for referrals in other countries to ensure that your bases are covered with respect to taxation, as well as wealth and asset transfer. If you have engaged the services of an investment and wealth management firm such as Whittier Trust, they can connect the full picture so nothing gets overlooked or stuck in the transfer process. “We can help facilitate clients getting those boxes checked so it’s one less thing to worry about,” says Bitterman. “That way our clients can just focus on enjoying the property.”
International estate planning doesn’t have to present insurmountable challenges if you share information as soon and as widely as possible with your financial services team, which could include counsel, tax attorneys, trust lawyers, account managers and others. “Talk to your team,” says Bitterman. “The more you disclose, the easier it is for us to find things to follow up on so that your wishes are carried out and your estate planning goals are met.”